euro

EU success or crisis?

EU success or crisis?

The German Finance Minister Wolgang Schauble has been a strong advocate of austerity, supply side reforms and ‘sound money’ policies. (i.e. sticking rigidly to inflation targets). Generally, this has been the preferred approach of Europe to the ongoing debt crisis and recession of the past few years. Recently, he has claimed that the European economy is recovering well and this is vindication that the broad approach of fiscal discipline and structural reforms are laying a foundation for strong economic growth in the future. Writing in the Financial Times, Schauble states:

Forecasts for Pound to Euro

Forecasts for Pound to Euro

The recent history of the Pound to Euro, and forecasts for the next few months.Latest Sterling exchange rates at Bank of England Since the  summer of 2012, the Pound has fallen nearly 11% against the Euro. The main reason is that the intervention of the ECB has helped to stabilise the Euro and EU debt fears have temporarily receded. As a consequence, money has started to flow into the Eurozone again, and there is less reason…

Why Do Countries Want to Join the Euro?

Why Do Countries Want to Join the Euro?

One thing I really struggle to understand at the moment is why any country would want to join the Euro. The experience of the past few years, is that membership of the Euro can devastate your economy. Given a chance, half of the members of the Euro would wish they had never joined. Greece, Spain, Italy, Portugal, Ireland would all be better off outside the Euro. But, leaving is even more difficult. Membership of the Euro, is like a trap which dooms your economy to inflexible exchange rates and can…

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Euro Bailout Explained

This video is depressingly close to the truth. I wrote a few more notes on the Euro bailout here. One other note, recently I seem to be writing a lot of criticism on the EU, ECB and Eurozone in the way they have been mismanaging the economy and this crisis (see: failures of ECB). But, this doesn’t make me a Eurosceptic. You can support the fundamental idea behind a project without supporting the details policy. European peace, stability and prosperity since 1945, is one…

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Should Greece Leave The Euro?

Readers Question: Should Greece Leave the Euro? Arguments for and against Greece leaving the Euro. One thing is clear, the Greek situation is dire. Government debt is very high, yet extremely harsh austerity  measures have only succeeded in pushing the economy back into recession and leading to much higher unemployment. Within the Eurozone, Greece is hopeless uncompetitive, reflected in a current account deficit of 10% of GDP (5 * bigger than UK’s current account deficit) For more see: Greece Recession Reasons to Leave The EuroLeaving the Euro will enable the Greeks…

Yields on EU Government Debt

Yields on EU Government Debt

For updated post: see: Bond yields on EU debt EU Debt crisis explained Since the financial crisis the bond yields in many European countries have diverged. For example, in Greece which has government borrowing of over 100% of GDP, bond yields are now significantly higher than German bond yields. The higher bond yields on Greek debt reflects the fact, investors are more nervous about buying Greek bonds because of the greater possibility of debt default. Bond Yields on EU DebtNote in these statistics from…

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Problems Facing Greece and Euro Video

I made a short video on some of the problems facing Greek economy and Euro below. Recently, the EU and Germany have been making suggestions that they will offer Greece a bailout – to protect the value of the Euro (see: Telegraph article). However, I’m sure any bailout will have strict measures for Greece to reduce their budget deficit. The Greek economy still faces many deflationary pressures. The end of the fiscal crisis will not be the end of their problems.